In recent case, the National Anti-Profiteering Authority (NAA) has held that the denial of the benefit of rate reduction to the buyers of the product, and increasing the base price more than what he was entitled to increase has resorted to profiteering which is an offence under section 171(3a) of the act and therefore liable for imposition of penalty under the act.
The facts of the case that an application was filed by the appellants before standing committee on anti-profiteering for reduction of GST rate of sanitary napkins. The respondents alleged that they have not availed the benefit of reduction on the supply of it under section 17 of the CGST Act 2017
The DGAP stated that the respondents were immediately given effect to the reduction of GST rate from 12% to Nil on sanitary napkins appears to be correct, but based on the invoice issued by the distributors to the ultimate consumers it was observed that the base price of the product has been increased and the final selling price had remained the same despite the GST rate reduction. On account of the reduction in GST rate from 12% to nil the ITC reversed on the closing stock had become a cost to the respondent and no ITC was available as sanitary napkins were exempted. Since the cost of the ITC was more compared to the excess realisation made during such period and the allegation of profiteering by the respondent was not sustainable
The respondent stated in the light of the judgement of Hon’ble Supreme Court in Basant Industries Vs Assist. Collector Of Customs 1996 (81) ELT.195 SC, SA Builders Ltd. Vs CIT (Appeals )2007 1 Scc 781 and Hero Cycles ( Pvt) Ltd. Vs CIT (2015) 16SCC359 submitted that the authority was not interpreted the commercial expediency and the percentage in increase of the base price adopted by the DGAP was unreasonably high.it is stated that by virtue of section 17 (3) of the CGST Act of 2017 the authority shall exercise such powers and discharge such functions as may be prescribed. In the absence of such method prescribed in CGST the DGAP had applied his own method to conclude that and which resulted in profiteering and he was never afforded the opportunity to present his own method as the same is the violation of natural justice.
The authority held that the respondent has denied the benefit of rate reduction to the buyers of the product of sanitary napkin, he had increased the base price more than what he was entitled to increase in contravention of section 171(1) of CGST Act 2017 and has thus resorted to profiteering which is an offence under section 171(3a) of the act and therefore he liable for imposition of penalty under the act.
